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LOS ANGELES COUNTY BAR ASSOCIATION

VIEWS: 4 PAGES: 6

									                   LOS ANGELES COUNTY BAR ASSOCIATION
            PROFESSIONAL RESPONSIBILITY AND ETHICS COMMITTEE


                                        OPINION NO. 524
                                          May 16, 2011

          WHAT ARE THE ETHICAL RESPONSIBILITIES OF AN ATTORNEY
           WITH REGARD TO THE HIRING OF NONLAWYER EMPLOYEES
          WHO MAY BE IN POSSESSION OF CONFIDENTIAL INFORMATION?


                                             Summary

        This Opinion addresses the duties of an attorney who hires a nonlawyer (such as a law
clerk, secretary, researcher, investigator, etc) 1, who has previously worked in a capacity in which
the nonlawyer may have been exposed to or acquired confidential information, pertaining to an
adverse party, which may be material to matters on which the hiring firm is engaged. 2

        The Committee believes that it is the obligation of the hiring firm, before hiring a
nonlawyer employee who has worked on matters at another firm, to conduct a reasonable
investigation into whether the proposed employee has been exposed to or acquired confidential
information during prior employment relevant to legal matters which may arise in the course of
the new employment. The hiring firm should in particular ascertain whether the proposed
employee’s former firm is or has been opposing counsel to the hiring firm on any current cases,
to determine whether the proposed employee has been exposed to confidential information of an
adverse party or witness regarding those cases. However, the hiring firm must not attempt to
delve into the substance of any information the nonlawyer may have acquired. It is the
obligation of the hiring firm to instruct the nonlawyer employee, once hired, as to his or her
confidentiality obligations, and, absent first obtaining the consent of the former employer or the
affected client of the former employer, to promptly screen the nonlawyer employee from
involvement in particular matters if the nonlawyer is in possession of confidential information
which is materially related to matters in which the hiring firm represents an adverse party. The
opinion also addresses the elements of an adequate screen.




       1 The discussion of nonlawyer employees does not include paralegals, for purposes of
this Opinion, as paralegals are subject to the same confidentiality requirements as attorneys
under the provisions of Business & Professions Code Section 6453.

        2 In this Opinion, and consistent with Proposed California Rule of Conduct 1.01(c), the
term “firm” is used inclusively to refer to a law firm, a legal services organization, or the legal
department of a government, corporate, or other organization.

                                                  1
                                      Table of Authorities


Rules of Professional Conduct:
Rule 2-100 (Communication with a Represented Party)
Rule 3-110 (Failing to Act Competently)
Rule 3-310 (Avoiding the Representation of Adverse Interests)
Rule 3-500 (Communication)

Cases:
Adams v. Aerojet-General Corp., 86 Cal.App.4th 1324 (2001)
Flatt v. Superior Ct., 9 Cal.4th 275 (1994)
H.F. Ahmanson & Co. v. Salomon Brothers, Inc., 229 Cal.App.3d 1445 (1991)
In re Complex Asbestos Litigation, 232 Cal.App.3d 572 (1991)
Kirk, et al. v. First American Title Insurance Co., 183 Cal.App.4th 776 (2010)
Trousil v. State Bar, 38 Cal.3d 337 (1985).
Waysman v. State Bar, 41 Cal.3d 452 (1986)

Ethics Opinions:
ABA Informal Op. No. 88-1526 (1988)
Florida State Bar Association Ethics Op. No. 86-5 (1986)
Michigan State Bar Ethics Op. No. RI-115 (1992)
New York State Bar Association Ethics Op. No. 774 (2004)


                                              Facts

        An attorney at Second Firm hires two law clerks for the summer to work on intellectual
property cases, including a case by Second Firm’s client Writer against Studio over the genesis
of a film project. The prior summer, both law clerks worked for First Firm, which represents
Studio. In interviewing the law clerks, Second Firm learns that while employed by First Firm,
Law Clerk A billed approximately 100 hours on investigating the origins of the film project in
question, sitting in on a meeting with the client, and related legal research. While performing
these tasks, Law Clerk A reviewed confidential memoranda and documents. Law Clerk B did no
work on the particular film project in question, but billed 10 hours of time that was charged to
Studio for Law Clerk B’s generic research on the standards for summary judgment.

                                           Discussion

A.     Obligations of Nonlawyers

        Non-attorney employees such as law clerks, secretaries, and investigators are not subject
to the Rules of Professional Conduct. Instead, the duty of competence of members of the bar
under Rule 3-110 encompasses the duty to supervise the work of non-attorney employees or
agents. See CRPC 3-110 (Discussion), citing, inter alia, Waysman v. State Bar, 41 Cal.3d 452
(1986), Trousil v. State Bar, 38 Cal.3d 337 (1985). Attorneys are held accountable for their


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employees’ conduct, particularly where that conduct poses a clear threat to attorney-client
confidentiality and the integrity of the judicial process. In re Complex Asbestos Litigation, 232
Cal.App.3d 572, 603 (1991).

B.     Confidentiality

         Confidentiality is fundamental to our legal system. Accordingly, Rule 3-310(E) of the
California Rules of Professional Conduct prohibits attorneys from accepting employment
adverse to clients or former clients “where, by reason of the representation of the client or former
client, the member has obtained confidential information material to the employment,” unless the
former client has given informed written consent. Under the rules, an attorney who possesses
confidential information such as that obtained by Law Clerk A above would be prohibited from
working on that matter or a substantially related matter at Second Firm. If no steps are taken to
screen the newly hired attorney, and attorneys in Second Firm become exposed to confidential
information of the adverse party, disqualification of Second Firm might result, because where
one attorney is disqualified from representation because of a conflict, the disqualification
generally extends to the entire firm. Flatt v. Superior Ct., 9 Cal.4th 275, 283 (1994). 3

         It is important to emphasize that this opinion deals with the ethical obligations of the
lawyers in Second Firm, not the legal standards for disqualification. However, disqualification is
one of the potential consequences of an ethical violation, and thus is relevant for consideration.
In the context of a disqualification motion, the California Court of Appeal has held that “an
inflexible presumption of shared confidences would not be appropriate for nonlawyers,” because
their “training, responsibilities, and acquisition and use of confidential information” differ from
those of lawyers. Complex Asbestos, 232 Cal.App.3d at 593. The court endorsed instead a
rebuttable presumption of shared confidences between nonattorney employees and their new
employers as to matters on which the nonattorney worked, and allowed the presumption that
information has been shared to be rebutted by showing that “the practical effect of formal
screening has been achieved.” Id. at 596.

C.     Duty to conduct reasonable inquiry without seeking to obtain confidential information

        The Committee believes that in order to comply with their obligations under Rule
3-310(E), the hiring firm’s attorneys have a duty to conduct a reasonable inquiry into the
possibility that a prospective employee has been exposed to confidential information in the prior
employment regarding a matter material to the current employment. The inquiry should not seek
to delve into the substance of the information or confidences the prospective employee may have
acquired, as the very act of doing so may trigger the divulging of confidential information.
Rather, the purpose of the inquiry should be to determine whether the employee was likely to

       3
          The Court of Appeal has recently held that Flatt does not mandate automatic vicarious
disqualification, and that there is instead a rebuttable presumption that an attorney’s knowledge
of client confidences is imputed to the new firm. The presumption may be rebutted by evidence
that the new firm adequately screened the new attorney. Kirk, et al. v. First American Title
Insurance Co., 183 Cal.App. 4th 776, 801 (2010).


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have been exposed to information which must be shielded from the hiring firm. One element of
a reasonable inquiry would be to present the new hire with a list of matters on which the new
employee’s former firm and the hiring firm are opposing counsel and ask the new hire to indicate
any matters on which he or she worked. Another might be to ask the new hire generally what
type of cases or matters he or she worked on, while cautioning that no confidential information is
sought. While this Opinion concerns the ethical duties of attorneys, which are distinct from the
bases of disqualification, it is noted that a hiring firm’s failure to conduct a reasonable inquiry
into the likelihood that a new employee has been exposed to confidential information materially
related to matters on which the hiring firm is adverse to a client or former client of the former
firm carries the risk of disqualification and other adverse consequences. 4

D.     Hiring Firm’s Obligations and Elements of an Adequate Screen

        When a hiring firm determines that a new hire or prospective employee has been exposed
to confidential information likely to be material to a matter at the new firm, one option is to seek
the consent of the former employer before making the hire. (See, e.g., Complex Asbestos, 232
Cal.App.3d at 593 n9 (suggesting consent and noting that Rule 2-100 would preclude the hiring
attorney from seeking the consent directly from the opposing party).

        If consent is not available, the hiring firm can fulfill its obligation to ensure that its
employees comply with duties of confidentiality by obligating the new hire to refrain from
divulging confidential information, and by screening the new hire, so that the new hire cannot
provide or receive information regarding the matter from which he or she is screened. Elements
of an adequate screen include written notification to all legal staff to isolate the screened
employee from communication regarding the matter, prevention of the screened employee’s
access to the relevant files, admonishment of the employee not to discuss the prior matter with
the new firm, and a search of the firm’s records to ensure that all cases on which the new
employee’s former firm is opposing counsel are identified. Complex Asbestos, 232 Cal.App.3d
at 593-94, 596. 5 The Committee believes that electronic security is also an important element of
an effective screen. Electronic files should be password-protected and the password withheld
from screened employees. Effective practices may also include documenting the continued
existence and impermeability of the screen, for example by periodic electronic or written

       4
          The Committee notes that a nonlawyer may be subject to contractual confidentiality
obligations and should have been instructed by his or her former firm as to these obligations
prior to departure. This Opinion does not deal with the obligations of the firm from which a
nonlawyer departs.
       5
          The Court of Appeal recently elaborated further on the elements of an effective screen
for attorneys, including “(1) physical, geographic, and departmental separation [], (2)
prohibitions against and sanctions for discussing confidential matters; (3) established rules and
procedures preventing access to confidential information and files; (4) procedures preventing a
disqualified attorney from sharing in the profits from the representation; and (5) continuing
education in professional responsibility.” Kirk, 183 Cal.App. 4th at 810-11. The Committee
believes the same elements, other than prevention of profit-sharing, are applicable to nonattorney
personnel.


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reminders to all staff or by requiring periodic certification by screened staff that they have not
breached the screen.

        A similar conclusion regarding the appropriateness of screening has been reached by the
American Bar Association and ethics authorities in several states, in some cases even before
screening was accepted for attorneys. See, e.g., ABA Inf. Op. 88-1526 (1988) (law firm hiring
opposing firm’s former paralegal can avoid disqualification by screening paralegal and
admonishing paralegal against disclosure of any information related to representation of former
firm’s clients); NY Eth. Op. 774 (2004) (law firm hiring nonlawyer must remind nonlawyer to
protect confidential information from prior employment and must instruct its lawyers not to seek
or accept confidential information if nonlawyer fails to comply with this instruction); Fl. Eth.
Op. 86-5 (1986) (hiring firm has duty not to seek or permit disclosure by nonlawyer of
confidence or secrets of opposing firm’s clients). 6

                                            Conclusion

         With regard to the fact scenarios above, the Committee believes that Second Firm must
screen Law Clerk A from any involvement in matters adverse to Studio which are substantially
related to the work that Law Clerk A performed at First Firm the previous summer. The actions
of sitting in on a client meeting and investigating the origins of the particular film project will
have imparted confidential information to Law Clerk A which Law Clerk A must not share with
Second Firm. Second Firm must therefore admonish Law Clerk A not to share any information
about his or her work in the matter, must screen Law Clerk A from any involvement on related
matters in which First Firm’s clients are adverse to Studio, and must admonish all others in
Second Firm not to discuss such matters with Law Clerk A.

        The Committee does not believe that screening of Law Clerk B is necessary. Where a
nonlawyer employee worked only a minimal number of hours on a matter, researched only
general points of law and was not exposed to confidential information, there is no presumption
that confidences were acquired, and therefore no need to screen that employee in subsequent
employment. C.f. H.F. Ahmanson & Co. v. Salomon Bros., Inc., 229 Cal.App.3d 1445, 1455
(1991) (in determining whether disqualification is required, court should take “pragmatic
approach,” focusing on the nature of the former representation, including the nature and extent of

       6
         The Committee is aware of ethics opinions and case law in some states suggesting that
the professional rules applicable to lawyers should apply to non-members, but rejects that
standard in favor of the principles set forth in Complex Asbestos and this Opinion. See, e.g., MI
Eth.Op. RI-115 (1992) (rules for disqualification of law firms based on lawyers transferring
employment apply equally to transfers of nonlawyer employees); Williams v. Trans World
Airlines, 588 F.Supp. 1037, 1044 (W.D. Mo. 1984) (disqualification standard for attorneys and
secretaries should be the same). Compare Complex Asbestos, 232 Cal.App. 3d at 593 (“There are
obvious differences between lawyers and their nonlawyer employees in training, responsibilities,
and acquisition and use of confidential information. These differences satisfy us that a rebuttable
presumption of shared confidences provides a just balance between protecting confidentiality
and the right to chosen counsel.”)


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the attorney’s involvement.) However, screening of Law Clerk B might assist Second Firm in
defending a motion for disqualification, should one be brought, and therefore may be prudent,
even if not required. Moreover, the efficacy of a screen to avoid vicarious disqualification will be
assessed on a case by case basis. Kirk, 183 Cal.App.4th at 811. Thus, the timing of the
establishment of the nonlawyer employee’s screen and the adequacy of its procedures weigh
heavily in the determination whether or not a lawyer has complied with his or her ethical duties
as to supervision and maintaining confidentiality.

       Finally, the Committee believes that when a firm hires a nonlawyer who will be screened
from involvement on a client’s matter, and consent from the nonlawyer’s former firm is not
obtained, the hiring firm has a duty under Rule 3-500 to inform the client of that development,
because of the possibility of a disqualification motion based upon the hire.


        This opinion is advisory only. The Committee acts on specific questions submitted ex parte
and its opinion is based on such facts as are set forth in the questions submitted.




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